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CHINA IN THE NEW DECADE

China International Business, January 19, 2010

This year is likely to be a turning point for the world economy, not just with the global financial crisis wearing off and the world economy needing to be rebuilt, but also as the starting point for the decade, or maybe even a century-long goal of fighting climate change, finding alternatives to waning natural resources, and integrating the Chinese financial system in with the rest of the world's. With China's place in the world economy growing every day, its input into global issues and developments will be profound.

CIB looks at four of the biggest issues concerning China, and how each of them might unfold over the next year and even decade.

RESOURCES: PEAK OIL

Though the argument that peak oil — the time when new oil discoveries can no longer keep up with oil demand — is fast approaching is still controversial, the argument that we are entering a time of greater resource shortages is not. As long as the basic formula of growing demand and shrinking resources remains true, commodity prices have an impetus pushing them forward.

As one of the world's major consumers of resources — particularly in construction inputs — what happens in the commodity markets in a large part happens to China. Over the past year high coal, iron ore and gas prices have grabbed headlines across China, and led to prolonged and intense negotiations with the largest providers of those resources. As late as last November the Chinese media was reporting that electricity producers had decided to forgo group negotiation of coal prices in exchange for one-on-one contracts – in other words the problem is as of yet unresolved. "It will be really difficult to have a ‘Chinese Price' next year [2010] as the three main producers of iron ore all expect increasing demand in China," notes Luo Bingsheng, vice president of manufacturer Chinasia.

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